Abstract
The market for corporate control plays an important role during industry shocks. However, this market fails in the presence of asymmetric information. I investigate the consequences of market failures for efficient firms that face difficulties to adapt to shocks because of informational frictions. I propose that alliances are a valuable alternative for these firms because ownership-sharing ameliorates informational frictions that induce market failures. I report empirical evidence supporting this hypothesis. Valuation uncertainty and the cost to access external credit increases the odds of establishing alliances during shocks and these alliances create more value than alliances announced in other periods.
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